Moody’s maintained Spain’s credit rating at Baa3 at the end of Tuesday, a move that spurred speculation that the troubled country will be applying for EU aid soon. Gold promptly rose 0.2 percent on the news, rising to $1,750.14 per ounce on Wednesday.
The euro reached a one-month high after Moody’s announced its decision, and the dollar index dropped to a two-week low. Of course, the weaker dollar means dollar-priced commodities become more attractive for prospective buyers dealing in other currencies.
From Reuters:
“Gold has moved in tandem to a certain degree with the euro and other commodities and rallied overnight on a weaker dollar, but it has run out of steam,” said David Govett, head of precious metals at Marex Spectron.
“Most people are sitting back and waiting for tomorrow’s European Union summit to go ahead to see if anything comes out of that. If there was a sudden announcement and Spain asked for help then it will be good for the euro, the dollar would come off and it would be good for gold.”
Later this week, new U.S. housing market reports and China’s third quarter GDP report will no doubt be scrutinized by eager investors. If the figures look weak, then speculation might increase regarding stimulus action in the near future.
That would benefit gold even more. Gold nearly broke the $1,800/oz barrier recently but has since fallen off a bit. It’s a short-term correction, though, and things could change very quickly.
Bullion-backed ETF holdings increased by nearly 16,700 ounces on Tuesday thanks to a 28,000 oz inflow to the New York Comex Gold Trust.
